Four Defendants Indicted in Alleged $10 Million Bank Fraud Scheme Involving the Sale of 26 Gas Stations in Four States

Four defendants were indicted on federal charges for their alleged roles in a scheme to fraudulently obtain more than $10 million in loan proceeds from a suburban bank through the sales of 26 gas stations in Illinois, Iowa, Nebraska, and Wisconsin. Two defendants, Charnpal Ghuman and Aga Khan, co-owned the gas stations and sold them to purchasers financed by the bank loans and guaranteed in part by the Small Business Administration. They allegedly recruited purchasers and arranged the loans through a bank loan officer, Akash Brahmbhatt, based on false financial representations, including false tax returns prepared by Shital Mehta, an accountant, both of whom also were indicted.

A fifth defendant, Khan’s brother, Shabbir Khan, was charged separately with tax offenses arising from the bank fraud investigation.

A 23-count indictment returned by a federal grand jury earlier this month was unsealed yesterday following the arrests of Ghuman, 34, of North Barrington, who was charged with 19 counts of bank fraud, three counts of bank bribery, and one count of filing a false federal income tax return; and Khan, 33, of Schaumburg, who was charged with four counts of bank fraud. Both men pleaded not guilty at their arraignment today and remain in federal custody pending a detention hearing at 10:30 a.m. Monday before U.S. Magistrate Judge Daniel Martin in federal court.

The indictment seeks forfeiture of approximately $10 million from Ghuman and Khan, as well as $198,180 in proceeds from the sale of Ghuman’s 2005 Porsche Carrera GT Coupe, which was allegedly purchased with fraud proceeds.

Brahmbhatt, 39, formerly of Naperville and currently living in Texas, and Mehta, 47, of Elk Grove Village, were each charged with one count of bank fraud. They were not arrested and will be arraigned on a date to be determined in U.S. District Court.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division, together with officials of the Small Business Administration Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General.

According to the indictment, American Enterprise Bank, based in Buffalo Grove, was authorized to process SBA loans on its own if the loan satisfied SBA qualifications and rules, including a requirement that SBA loans could not be used to finance 100 percent of a business investment.

Between 2006 and 2009, the defendants allegedly engaged in the scheme, which involved the sales of 26 gas stations, including stations in the Illinois towns of Macomb, Mendota, New Boston, Rock Island, and Silvis, as well as three other states.

As part of the scheme, Ghuman and Khan allegedly recruited purchasers of their gas stations who did not qualify for SBA loans and arranged for loans to be made in whole or in part in the name of the purchaser’s relative or friend who had acceptable credit, even though Ghuman, Khan, and Brahmbhatt knew that this straw purchaser would have no role in the gas station or repayment of the loans. In addition, the same three defendants caused false information and documents to be submitted to the bank, including false information about employment, income, assets, and liabilities; false tax returns allegedly prepared by Mehta; and false information about the purchasers’ contributions of equity.

Ghuman and Khan allegedly gave gifts to Brahmbhatt, including cars, in exchange for his alleged assistance in processing the fraudulent loans. The loan proceeds were paid to Ghuman and Khan as payment for gas stations owned by various business entities they controlled.

Ghuman alone was charged with filing a false federal income tax return for 2006, when he reported total and adjusted gross income of $203,583, and the total tax was $37,260, allegedly knowing that the actual amounts substantially exceeded those figures.

Shabbir Khan, 31, of Schaumburg, was charged separately yesterday with two misdemeanor counts of failing to file federal income tax returns for 2008 and 2009. He allegedly had gross income in 2008 in excess of $55,000 from his employment at a cell phone store and from broker’s fees paid to him by American Enterprise Bank as commissions on the loans, and gross income in excess of $30,000 in 2009 from his cell phone store employment.

Each count of bank fraud and bank bribery carries a maximum penalty of 30 years in prison and a $1 million fine. The tax count against Ghuman alone carries a maximum penalty of three years in prison and a $250,000 fine. The tax charges against Shabbir Khan each carry a maximum penalty of a year in prison and a $100,000 fine. In addition to criminal penalties, including mandatory costs of prosecution, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Sheri Mecklenburg.

An indictment contains merely charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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Nichols Kaiga Charged with Attempting to Illegally Export Aluminum Tubes to Malaysian Front for Individual in Iran

A Belgian businessman was scheduled to be arraigned on federal charges alleging that he violated U.S. laws by attempting to export aluminum tubes that were controlled for nuclear non-proliferation purposes from a company in Schaumburg, through Belgium, to a company in Kuala Lumpur, Malaysia, without obtaining a license from the U.S. Commerce Department, federal law enforcement officials announced. The case follows a lengthy undercover investigation in which the Schaumburg company, which was cooperating with law enforcement, actually shipped different non-controlled aluminum tubes to the defendant’s business in Belgium before they were allegedly illegally transshipped to Malaysia.

Court documents allege that the Malaysian business is a front company operated by an individual who is located at times in Iran.

The case involves 7075 T6 aluminum tubing with an outside diameter of 4.125 inches and an ultimate tensile strength of 572 MPa (megapascals), which is used in the aerospace industry, among other applications. As a controlled material, a license was required from the Commerce Department’s Bureau of Industry and Security to export the 7075 aluminum from the U.S. to Malaysia, but not to Belgium.

The defendant, Nichols Kaiga, 36, of Brussels and London, was charged with one count of violating the International Emergency Economic Powers Act (IEEPA) and two counts of making false statements on U.S. export forms in a three-count indictment returned by a federal grand jury last Thursday. Kaiga has been in federal custody since he was arrested on June 25 in New York City, approximately a week after he arrived there. A criminal complaint filed at the time of his arrest was unsealed when he was indicted last week.

The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Gary Hartwig, Special Agent in Charge of Homeland Security Investigations in Chicago; Robert J. Shields, Jr., Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Ronald B. Orzel, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division is providing assistance in the case.

According to the complaint affidavit and the indictment, the Schaumburg company, identified as Company A in court documents began cooperating with law enforcement in December 2007. The cooperation began after a person identified as Individual A, who was at times located in Iran, attempted to purchase 7075 aluminum from Company A, to be shipped to a company in the United Arab Emirates, but was denied an export license. In late 2009, an undercover agent began posing as an employee of Company A.

Between November 2009 and February 2012, the indictment alleges that Kaiga, who was managing director of a Belgian company, Industrial Metals and Commodities, attempted to export 7075 aluminum from Company A to Company B in Malaysia without an export license. The complaint affidavit alleges that Company B was a front for Individual A in Iran. The false statements charges allege that Kaiga lied on Commerce Department export declaration forms, which stated that the ultimate destination and recipient of the 7075 aluminum were in Belgium.

In November 2011, material that was purported to be 7075 aluminum, but was actually substituted with a different aluminum by Company A in cooperation with law enforcement, was picked up from Company A by a freight forwarding company designated by Kaiga’s Belgian company. The material arrived in the Belgian port of Antwerp on December 1, 2011, and two months later it was shipped by a freight forwarding company to Individual A’s front company in Malaysia.

Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine, while making false statements to government agencies carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorneys Raj Laud and Nancy DePodesta.

An indictment contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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Joseph Mollica, Former Cook County Forest Preserve District Assistant Engineer, Charged with Accepting $10,000 in Kickbacks from Two District Contracts

Two facilities of the Forest Preserve District of Cook County, which were spruced up in 2011, became part of an FBI sting investigation that resulted in federal charges against a former assistant engineer for allegedly taking $10,000 in kickbacks from two contracts he steered to a contractor who was cooperating with law enforcement. The defendant, Joseph Mollica, was indicted on two counts of federal bribery, law enforcement officials announced today.

Mollica, 52, of Elmwood Park, will be arraigned next Wednesday in U.S. District Court. He was released on his own recognizance after he was arrested on October 3 and charged initially in a criminal complaint. Mollica was an assistant engineer for the Forest Preserve District for more than 20 years until last week, and he and others had authority to influence and award contracts for work under $25,000.

Together, the indictment and complaint allege that on October 14, 2011, Mollica accepted a $6,000 kickback from a $24,900 contract to refinish and refurbish the Forest Preserve District’s headquarters building, where he worked, located at 536 N. Harlem Ave. in River Forest. On December 16, 2011, he allegedly accepted a $4,000 kickback from a $16,500 contract to power wash and stain the building and boardwalk and do caulking at the Sand Ridge Nature Center in Calumet City.

The indictment seeks forfeiture of $10,000 in alleged kickback payments.

In both instances, a cooperating individual, a construction company owner who recorded conversations and meetings with Mollica in which the contracts were arranged and the kickbacks were paid, appeared to perform the work properly and completely, according to the complaint affidavit of an FBI agent. The kickback payments occurred after the Forest Preserve District paid the cooperating individual for the work that was performed.

The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

Each count of federal bribery carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Christopher Hotaling.

An indictment contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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David M. Mark Sentenced to Prison for Role in Mortgage Fraud Scheme

A lawyer from Louisiana who worked locally as a real estate agent, was sentenced to three years in prison for his conviction on conspiracy and fraud charges related to his involvement in a mortgage fraud scheme involving hundreds of Las Vegas homes and more than $50 million in losses, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

David M. Mark, 37, of New Orleans, Louisiana, was sentenced by Senior U.S. District Judge Philip M. Pro. A jury convicted Mark on April 11, 2013, of one count of conspiracy to commit bank, wire, and mail fraud; two counts of bank fraud; and one count of mail fraud. Mark is free on a personal recognizance bond and must report to federal prison by January 31, 2014.

“The U.S. Attorney’s Office has been working diligently with its law enforcement partners since the mid-2000s to investigate and prosecute hundreds of persons who took advantage of their positions of trust to commit mortgage fraud,” said U.S. Attorney Bogden. “The harm to the community has been enormous, and we hope that the prison sentences that have been imposed have sent a message to others that this type of crime will not be tolerated.”

According to the indictment and evidence presented to the jury during the trial, Mark was employed as a real estate agent and transaction coordinator at Distinctive Real Estate and Investments, a company owned and operated by co-conspirator Eve Mazzarella who was convicted of fraud in December 2011 and sentenced to 14 years in prison. From about March 2006 to December 2007, Mark solicited persons with good credit to act as straw buyers to purchase homes in the Las Vegas area. Mark made arrangements to purchase the homes above the sellers’ asking prices and made arrangements for the excess funds to be redirected to business entities controlled by his co-conspirators under the pretense that they would make upgrades or perform repairs to the properties. Mark caused the straw buyers to apply for mortgage loans for the homes, knowing that the straw buyers could not afford and did not intent to make the mortgage payments. Mark caused false information concerning income, employment, assets, liabilities, and intent to occupy the homes to be placed in the straw buyers’ loan applications. Once the mortgage loans were approved by the financial institutions, Mark caused the financial institutions and escrow and title companies to make third party disbursements to shell companies controlled by his co-conspirators who had an interest in the transactions. Mark’s co-conspirators defaulted on the mortgage payments causing the properties to go into foreclosure and causing losses to the financial institutions of more than $50 million.

The case was investigated by the FBI and prosecuted by Assistant U.S. Attorneys Brian Pugh and Sarah E. Griswold.

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"Stop and Frisk" Public Safety Program Allowed to Continue Under Court Order

A federal appeals court Thursday blocked a ruling curtailing the New York Police Department's "stop-and-frisk" program, an order that could rattle the New York City political landscape and reverberate in law-enforcement agencies nationwide.

The Second U.S. Circuit Court of Appeals, in a 3-0 order, halted a U.S. District Court ruling that ordered a monitor to oversee the stop-and-frisk policy and alter a related training program. The city had appealed the ruling and asked the circuit court to stay any immediate effects of the lower-court ruling pending the appeal.

Under the stop-and-frisk program, the NYPD routinely stopped passersby, especially in high-crime neighborhoods, to pat them down for weapons even when there was limited reason to suspect wrongdoing. The technique has been criticized for disproportionately targeting blacks and Hispanics in poor areas.

In practical terms, Thursday's order means the NYPD can continue the stop-and-frisk practice until the higher court rules on the appeal.

In a court proceeding for a 1999 lawsuit on the stop-and-frisk tactic, Judge Scheindlin asked lawyers suing the city, "[I]f you got proof of inappropriate racial profiling in a good constitutional case, why don't you bring a lawsuit?" according to the appeals court's order. Some of the lawyers involved in that case ultimately brought the lawsuit against the city that led to Judge Scheindlin's ruling curtailing the program.

In a written statement Thursday, the judge noted she had agreed with the city on a key issue. "I sided with the City and directed the plaintiffs to bring a new action rather than a contempt proceeding," she said. "I said I would take the case as related because the plaintiffs charged that the City had violated my order in [the older case]."

Legal experts said Judge Scheindlin's removal was unusual and that such moves happen only several times a year. Stephen Gillers, a law professor at New York University, said the court was likely swayed by the high-profile nature of the case and its potential to affect public safety, coupled with the judge's public interviews and the appearance she gave that she was openly encouraging lawyers to challenge the city in court.

While New York uses stop-and-frisk much more widely than most other cities, other police departments had begun to emulate the NYPD. Experts said the ruling would lead police in those cities to tread more carefully in their own tactics.

Mayor Michael Bloomberg has credited the program with helping drive crime in New York City to record lows. But Democratic mayoral nominee Bill de Blasio repeatedly attacked the Bloomberg administration for using stop-and-frisk too often against minorities in high-crime neighborhoods, and said he would reduce its use.

Many have credited his outspoken stance against the policy with helping him win the Democratic primary election. He faces Republican Joe Lhota on Tuesday in the city's general election. In a statement, Mr. de Blasio said he was disappointed by Thursday's order. "We have to end the overuse of stop and frisk—and any delay only means a continued and unnecessary rift between our police and the people they protect," he said.

City officials praised it. "We could not be more pleased with the Court's findings," New York City Corporation Counsel Michael A. Cardozo said in a news release. "In short, the ruling of unconstitutional practices is no longer operative, and that question will now receive a fresh and independent look both by the appeals court and then, if necessary, by a different trial court judge."

Lawyers representing the lead plaintiff in the stop-and-frisk case said they were disappointed by the order and were reviewing legal options to challenge the appellate court's decision to remove Judge Scheindlin. "It's remarkable the lengths the appellate court has gone to take this case away from the judge who's worked hard on it for the past 14 years," said Darius Charney, a senior staff attorney at the Center on Constitutional Rights.

The appeals court didn't weigh in on the substantive arguments in the city's appeal in Thursday's order but said it would hear the merits of the case in March.

Thanks to Christopher Matthews.

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